At a time when raising funds is a concern for private equity (PE) players globally, sponsor commitments are increasingly gaining relevance among funds as a committed source of capital. Experts said that in many cases, it has rescued the funds which were unable to achieve closures due to inadequate commitments. The trend has become especially prominent in the last few months when limited partners (LPs) tightened the flow of capital to private equity funds. Sponsor commitment or anchor investment is the amount of capital committed by the sponsors of a fund. The anchor investment is made at the initial stage of fund-raising to start the process and provide a sense of confidence to LPs. […]

Private Equity (PE) and Venture Capital (VC) firms which have been using the trust route as vehicle for funds to pass through the tax at entity level are divided if they should opt for Limited Liability Partnerships (LLPs). The government had introduced the LLP mechanism on April 1 this year, giving PEs and VCs hope of an alternative to the trust route. However, yesterday’s Budget announcement with regard to taxing LLPs at the entity level has created some disappointment. “It is out of sync with international practices,” said Nishith Desai, founder of Mumbai-based corporate law firm Nishith Desai Associates. “In a cross-border scenario, issues relating to application of tax treaties and availability of tax credit to foreign partners will arise. There are also problems on the treatment of losses in the hands of the partners,” he said. […]